20.9 Endowment Scenario 9 - Redress Manager 2023

Redress Manager 2023
Endowment Scenario 9

Sold Into Retirement

The following case has been reproduced, with the permission of The Financial Ombudsman Service who retains the copyright, using fictitious information based on a case study printed in the September 2002 Financial Ombudsman News.

Reproduction of text as appeared in September 2002 Financial Ombudsman News:

“20 / 07 Mr and Mrs P complained to the firm when they discovered that their mortgage endowment policy might not produce enough to repay their mortgage, and that it extended for six years after Mr P retired.

The firm upheld the complaint but told the couple that no redress was payable. This was because they had not suffered any loss as a result of having the mortgage endowment policy rather than a repayment mortgage. The current encashment value of the mortgage endowment policy was more than they would have repaid over the same period if they had taken out a repayment mortgage.

Dissatisfied with the firm’s response, the couple brought their complaint to us. The firm had calculated redress in accordance with Regulatory Update 89. However, in comparing the couple’s actual position with the one they would have been in if they had taken out a repayment mortgage, the firm overlooked the fact that the term of the mortgage endowment policy had been inappropriate.

The firm had used as a basis for its calculations a repayment mortgage over a 25-year term (the same length as the endowment policy). To coincide with the date when Mr P retired, the repayment mortgage needed to extend over 19 years. We therefore asked the firm to recalculate.

It did this and found the Mr and Mrs P had indeed suffered a loss. It therefore offered the appropriate amount of redress, which the couple accepted.”

Fictitious Case Information

Lender	Halifax
Mortgage	£85,000
Start Date	10/02/93
To Date	20/08/02

Term	19 years
Endowment Premium	£45.00
Surrender Value	£17,500

The DTA premium would have been £11.50